Suppose Real GDP Is $12

question 219

Multiple Choice

Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion.To move the economy back to potential GDP,Congress should

• A)lower government purchases by an amount less than $200 billion.
• B)lower government purchases by $200 billion.
• C)raise taxes by $200 billion.
• D)lower taxes by $200 billion.
• E)raise taxes by an amount more than $200 billion.

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Definitions:

Substitute Good

A product or service that can be used in place of another to satisfy similar needs or desires, often influencing consumer choices and market dynamics.

Equilibrium

A situation in a market where the quantity demanded equals the quantity supplied, leading to no net change in price.

Quantity Supplied

The total amount of a good or service that producers are willing to sell at a given price level.

Compact Disks

Optical storage media used to store data, including music and software, now largely superseded by digital formats.